For the July/August period sales tax dropped 6% year over year and bed taxes dropped 3%.  What's most troubling is that the downward trend is accelerating.  For August alone sales and bed taxes were down 11%, the worst percentage decline for the year.  Construction related sales tax revenue was the hardest hit, declining 38% in August vs. the prior year.

It gets worse.

Said Vice Mayor John Bradshaw, who operates a local jeep tour company, "For businesses in Sedona, if August was a bad month, September is going to be worse...We should consider implementing a spending program to attract tourists to help our businesses.  I recommend targeting Phoenix because people are staying closer to home."  He went on to say, "[Local] businesses rely on spring, summer, and fall [tourism] to make in through the winter. I predict that a lot of businesses won't make it through the winter unless they get some help."

Said Councilwoman Nancy Scagnelli, who owns retail shops in Tlaquepaque and Uptown, "When you get the September [sales and bed tax revenue] numbers in, it's going to be pretty shocking.  I question whether [tourists] are going to come in the spring. Spring is usually our best season, followed by the fall."

Despite these problems, it's not the end of the world. 

The city divides its activities into three segments:  General, Wastewater, and Capital.  Each segment has its own reserve fund for a rainy day.  The General reserve fund currently sits at $10.09 million, and has decreased $520,000 in the first two months of the 2008/09 fiscal year.  The Wastewater reserve fund is $32.4 million and the Capital reserve fund is $10 million.

According to City Manager Eric Levitt, the Capital reserve fund is the most at risk of being depleted. Said Levitt, "The capital fund is very well stretched, and that might be a kind word for it."

Said Councilman Cliff Hamilton, "I'm really nervous with what's going on in the economy.  If [our reserve fund] is a rainy day fund, it sure looks like it's raining." 

Said Levitt, "It's definitely raining." 

To address the problem, Levitt recommended that the city cut certain capital projects for the rest of the year such as Posse Ground sidewalks, solar panels and flooring for city buildings, exterior lighting, and an Uptown roundabout, to name a few.  The total projected cuts were $1.655 million.

In the end, the council voted 7-0 to accept most of the proposed capital cuts except for a traffic signal at Airport Road, and the cost of the design for Posse Ground sidewalks.  The council also asked city staff to come back with a plan to reduce the general operating budget which could include a hiring freeze.

The city council will get an update from city staff on the budget again at the 2nd meeting in November or the 1st meeting in December.
 

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